Biopharma’s risks are society’s rewards

Biotechnology entrepreneurs take great financial risks in their attempts to innovate and find cures and therapies for diseases – and only occasionally do they succeed. When they do, patients benefit and investors receive a return on the investments made, allowing a continuing cycle of innovation.

The reality of the market is that the return on successful medical innovation must be sufficient to provide a favorable risk profile to ensure investment in the next generation of medical breakthroughs.

The biopharmaceutical industry is unique in that there are regulated pathways that allow for legal copies of drugs and highly similar versions of biologics (known as generics and biosimilars) to be brought to market by competitors without requiring them to repeat all the same studies and clinical trials that the innovator needed to do. To give innovators a reasonable opportunity to secure a favorable return on their massive investments, federal law limits generic or biosimilar competition for a limited period of time. Those protections involve both patents and data exclusivity, which serve different and complementary purposes.

Typically, by the time a drug is finally approved by the FDA, there is roughly only 10 years left of the original 20-year patent term. Patents protect the drug, and often its use or method of manufacture. Patents also incentivize the R&D necessary to go from basic discovery, to translational and applied research, to the development and approval of an actual FDA-approved medicine that has been proven safe and effective through lengthy and expensive clinical trials. Data exclusivity, on the other hand, protects innovators against competitors “free riding” on all that innovative R&D by seeking FDA approval of identical or highly similar molecules based on the previous approval of the innovators’ product.

Today, approximately 88% of prescriptions are filled with generics, yet we have maintained a structure that incentivizes the continued medical breakthroughs.

Once patents and exclusivity are exhausted, society is rewarded with lower-priced versions of these innovative medicines for generations to come, while entrepreneurs continue the high-risk investment mode searching for the next medical breakthrough.

Bottom line: The system we have works well. It benefits our society with recurring cycles of new innovations and lower-priced medicines over time. The gift of biotechnology is that we are delivering the low-cost, innovative medicines that will allow our children and grandchildren to lead healthier, more robust lives.

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